Carbon taxation and various pollutants in Europe

At the Kyoto Conference in December 1997, the European Union agreed upon targets for reducing carbon dioxide (CO₂) emissions by 8 per cent of 1990 levels by 2010. Despite expected improvements in fuel use and efficiency, expected economic growth means a cut is needed relative to ‘business as usual’ forecasts for 2010 of about 11 per cent growth in emissions (Marshall 1998). There is, therefore, a role for a taxation or marketable permits to meet these goals. Such taxes/permits are bound to affect the terms of trade and real incomes, and since they affect patterns of fuel use they are also relevant to international pollution issues, such as the costs of acid rain pollution and its abatement.